T106 Summary and Slips - Information Return of Non-Arm's Length Transactions with Non-residents

Purpose

The T106 Summary and Slips are annual information returns used to report non-arm’s length transactions between reporting persons or partnerships and non-residents under section 233.1 of the Income Tax Act. The T106 Summary and Slips are prescribed forms.

Definitions

Under section 233.1 of the Income Tax Act:

A "reporting person" for a taxation year means a person (corporation, trust or individual) who, at any time in the year,

(a) is resident in Canada; or

(b) is non-resident and carries on business (other than a business carried on as a member of a partnership) in Canada.

A "reporting partnership" for a fiscal period means a partnership

(a) a member of which is resident in Canada in the period; or

(b) that carries on business in Canada in the period.

A "reportable transaction" means

(a) in the case of

(i) a reporting person for a taxation year who is not resident in Canada at any time in the year, or

(ii) a reporting partnership for a fiscal period no member of which is resident in Canada in the period, a transaction or a series of transactions that relate in any manner whatever to a business carried on in Canada by the reporting person or partnership in the year or period or a preceding taxation year or period; and

(b) in any other case, a transaction or series of transactions that relate in any manner whatever to a business carried on by a reporting person (other than a business carried on by a reporting person as a member of a partnership) or partnership in a taxation year or fiscal period.

The terms arm's length and non-arm's length are discussed in Interpretation Bulletin IT 419, Meaning of Arm's Length. Refer also to sections 251 and 252 of the Income Tax Act.

Who has to file

A reporting person has to file T106 documentation for a tax year in respect of reportable transactions in which the reporting person and the non-arm's length non-resident person (or partnership of which that non-resident person is a member) participated in the period. The reporting person has to file the T106 documentation if the amount of the total reportable transactions for all the non-residents combined is more than CAN $1,000,000 (i.e., the total of all Box I amounts is more than CAN $1,000,000).

A reporting partnership has to file T106 documentation for a fiscal period in respect of reportable transactions in which the reporting partnership and the non-arm's length non-resident person (or partnership of which the non-resident person is a member) participated in the period. The reporting partnership has to file the T106 documentation if the amount of the total reportable transactions for all the non-residents is more than CAN $1,000,000 (i.e., the total of all Box I amounts is more than CAN $1,000,000). File T106 documentation for the partnership only and not for each partner.

Where a reporting person or partnership’s total amount of the transactions with a particular non-resident during the taxation year is below $25,000, there is no need to report these transactions in Part III of the T106 Slip. Please see the notice at cra.gc.ca/tx/nnrsdnts/ntcs/t106-eng.html for additional information.

Branches

A Canadian branch of a foreign-based corporation or a foreign-based branch of a Canadian corporation does not have to file T106 documentation for notional transactions. However, non-arm's length transactions between a branch and a non-arm's length party have to be reported in the reporting person's/partnership's T106.

When to file

T106 documentation has to be filed on or before the following dates:

Corporations – six months after the end of the tax year.

Partnerships – the due date is the same as the due date for filing a partnership information return under section 229 of the Income Tax Regulations. If no partnership information return has to be filed, the reporting partnership’s due date is the day by which the partnership information return would be required to be filed if section 229 did apply to the reporting partnership.

Trusts – 90 days after the end of the tax year.

Individuals – April 30 after the end of each calendar year. For individuals who are self-employed, or individuals whose spouse is self-employed, the filing due date is extended, as with their T1 individual income tax returns, to June 15 after the end of the calendar year.

For short tax years/fiscal period ends, T106 documentation is due at the same time as the filing due date of the T1, T2, and T3 income tax returns or the T5013 information return. For short tax years/fiscal periods which together do not exceed 12 months, one set of T106 documentation is enough if information for the tax years/fiscal periods is detailed in a letter that must accompany the T106 documentation.

What to file

Each reporting person or partnership has to file one T106 Summary, as well as a separate T106 Slip for each non-resident. The information reported in the T106 is filed in respect of the corporation, partnership, trust or individual and not by sub-division, cost centre or individual partner.

Where to file

T106 documentation has to be mailed to the Winnipeg Taxation Centre, Data Assessment & Evaluation Programs, Validation & Verification Section, Foreign Reporting Returns, 66 Stapon Road, Winnipeg MB  R3C 3M2. T106 documentation has to be filed separately from the income tax return. Do not attach T106 documentation to your income tax return.

Penalties

Late Filing – A late filing penalty, or multiple late filing penalties for more than one T106 Slip may be assessed under subsection 162(7) of the Income Tax Act where T106 documentation is filed after the due date. The penalty is equal to the greater of $100 and $25 per day, as long as the failure to file continues, to a maximum of 100 days.

Failure to file – A failure to file penalty may be assessed under subsection 162(10) of the Income Tax Act where reporting persons or partnerships knowingly, or under circumstances amounting to gross negligence, fail to file or fail to comply with a request by the Canada Revenue Agency (CRA) for T106 documentation. The minimum penalty is $500 per month, to a maximum of $12,000 for each failure to comply. Where the CRA has served a demand to file T106 documentation, the minimum penalty is $1,000 per month, to a maximum of $24,000 for each failure to comply.

False statement or omission – A false statement or omissions penalty may be assessed under subsection 163(2.4) of the Income Tax Act where information provided on the T106 Summary or Slip is incomplete or incorrect. The penalty is $24,000.

Transfer Pricing Methodologies (TPM)

Use the codes listed below to reflect the main transfer pricing methodology.

1 Comparable Uncontrolled Price 2 Cost-Plus 3 Resale 4 Profit Split 5 Transactional Net Margin 6 Qualifying Cost Contribution Arrangement 7 Other

 

You can find more information on transfer pricing methods in Information Circular 87-2,International Transfer Pricing. The circular is available at our tax services offices and on the Internet at: canada.ca/taxes.

Purpose

The T106 Summary and Slips are annual information returns used to report non-arm's length transactions between reporting persons or partnerships and non-residents under section 233.1 of the Income Tax Act (Act). The T106 Summary and Slips are prescribed forms.

For greater certainty, where any reporting person or partnership and any non-arm's length non-resident person or partnership are participants in a transaction or series of transactions and as a result, any amount referred to in Parts III, IV, V or VI is arranged with, paid to or received from, an arm's length entity, these amounts must be reported.

Definitions

Under section 233.1 of the Act :

A "reporting person" for a taxation year means a person (corporation, trust or individual) who, at any time in the year,

1. is resident in Canada; or
2. is non-resident and carries on business (other than a business carried on as a member of a partnership) in Canada.

A "reporting partnership" for a fiscal period means a partnership

1. a member of which is resident in Canada in the period; or
2. that carries on business in Canada in the period.

A "reportable transaction" means

1. in the case of

1. a reporting person for a taxation year who is not resident in Canada at any time in the year, or
2. a reporting partnership for a fiscal period no member of which is resident in Canada in the period,

a transaction or a series of transactions that relate in any manner whatever to a business carried on in Canada by the reporting person or partnership in the year or period or a preceding taxation year or period; and

2. in any other case, a transaction or series of transactions that relate in any manner whatever to a business carried on by a reporting person (other than a business carried on by a reporting person as a member of a partnership) or partnership in a taxation year or fiscal period.

The terms arm's length and non-arm's length are discussed in Income Tax Folio S1-F5-C1, Related Persons Dealings at Arm's Length. Refer also to sections 251 and 252 of the Act.

Who has to file a T106 information return

A reporting person has to file a T106 information return for a tax year in respect of reportable transactions in which the reporting person and the non-arm's length non-resident person (or partnership of which that non-resident person is a member) participated in the period. The reporting person has to file the a T106 information return if the amount of the total reportable transactions for all the non-residents combined is more than CA $1,000,000 (i.e., the total of all Box I amounts is more than CA $1,000,000).

A reporting partnership has to file a T106 information return for a fiscal period in respect of reportable transactions in which the reporting partnership and the non-arm's length non-resident person (or partnership of which the non-resident person is a member) participated in the period. The reporting partnership has to file the a T106 information return if the amount of the total reportable transactions for all the non-residents is more than CA $1,000,000 (i.e., the total of all Box I amounts is more than CA $1,000,000). File a T106 information return for the partnership only and not for each partner.

Where a reporting person or partnership's total amount of the transactions with a particular non-resident during the taxation year is below CA $100,000 there is no need to report these transactions in Part III of the T106 Slip. Please see the notice at canada.ca/cra-de-minimis-policy-t106 for additional information. The revised threshold of CA $100,000, for reporting transactions in Part III, applies only to tax years or fiscal periods that begin in 2022 and later years/periods.

Branches

A Canadian branch of a foreign-based corporation or a foreign-based branch of a Canadian corporation does not have to file a T106 information return for notional transactions. For the purposes of the Act, the corporation and its branches are considered to be the same person. However, non-arm's length transactions between a branch and a non-arm's length party have to be reported in the reporting person's/partnership's T106 information return.

When to file

T106 information returns have to be filed on or before the following dates:

Corporations – six months after the end of the tax year.

Partnerships – the due date is the same as the due date for filing a partnership information return under section 229 of the Income Tax Regulations . If no partnership information return has to be filed, the reporting partnership's due date is the day by which the partnership information return would be required to be filed if section 229 did apply to the reporting partnership.

Trusts – 90 days after the end of the tax year.

Individuals – April 30 after the end of each calendar year. For individuals who are self-employed, or individuals whose spouse is self-employed, the filing due date is extended, as with their T1 individual income tax returns, to June 15 after the end of the calendar year.

For short tax years/fiscal periods, the T106 information return is due at the same time as the filing due date of the T1, T2, and T3 income tax returns or the T5013 information return. For short tax years/fiscal periods which together do not exceed 12 months, one set of T106 Summary and Slips is enough if the information for the tax years/fiscal periods is detailed in a letter that must accompany the T106 information return.

What to file

Each reporting person or partnership has to file one T106 Summary, as well as a separate T106 Slip for each non-resident. The information reported in the T106 information return is filed in respect of the corporation, partnership, trust or individual and not by sub-division, cost centre or individual partner.

Where to file

Partnerships can EFILE and NETFILE T106 information returns electronically for the 2017 and later fiscal periods. Corporations can EFILE T106 information return electronically for the 2015 and later tax years. Corporations and partnerships can attach supporting documentation such as financial statements related to EFILED foreign reporting returns, via the tax preparation software with the electronic Submit documents service. Individuals and trusts have to paper file the T106 information return. T106 information returns have to be filed separately from the income tax return. Do not attach a T106 information return to your income tax return. For the most up to date information about who can EFILE a T106 information return, see the "What's new" information on the T106 page at canada.ca/revenue-agency/services/forms-publications/forms/t106. T106 information returns can also be mailed to the Winnipeg Taxation Centre, Data Assessment & Evaluation Programs, Validation & Verification Section, Foreign Reporting Returns, 66 Stapon Road, Winnipeg MB R3C 3M2.

Penalties

Late Filing – A late filing penalty, or multiple late filing penalties for more than one T106 Slip may be assessed under subsection 162(7) of the Act where a T106 information return is filed after the due date. The penalty is equal to the greater of CA $100 and CA $25 per day, as long as the failure to file continues, to a maximum of 100 days.

Failure to file – A failure to file penalty may be assessed under subsection 162(10) of the Act where reporting persons or partnerships knowingly or under circumstances amounting to gross negligence, fail to file or fail to comply with a request by the CRA for a T106 information return. The minimum penalty is CA $500 per month, to a maximum of CA $12,000 for each failure to comply. Where the CRA has served a demand to file a T106 information return, the minimum penalty is CA $1,000 per month, to a maximum of CA $24,000 for each failure to comply.

False statement or omission – A false statement or omission penalty may be assessed under subsection 163(2.4) of the Act where information provided on the T106 Summary or Slip is incomplete or incorrect. The penalty is CA $24,000.

Transfer Pricing Methods (TPM)

Use the codes listed below to reflect the main TPM.

1	Comparable Uncontrolled Price
2	Cost-Plus
3	Resale
4	Profit Split
5	Transactional Net Margin
6	Qualifying Cost Contribution Arrangement
7	Other

You can find more information on TPMs at: canada.ca/cra-transfer-pricing.

Privacy Notice

Personal information is collected under the authority of section 233.1 of the Act and is used to monitor compliance with the foreign reporting requirements pertaining to non-arm's length transactions with non-residents. Information may also be used for the administration and enforcement of the Act, including assessment, audit, enforcement action, collections, and appeals, and may also be disclosed under information-sharing agreements in accordance with the Act. Incomplete or inaccurate information may result in various compliance actions, including the assessment of monetary penalties.

Social insurance numbers, business numbers, and/or trust numbers are collected for income tax purposes under section 237 of the Act and can be used under certain federal programs.

To find out more about the information the CRA collects related to the T106 information return, see Bank Number CRA PPU 035 at canada.ca/en/revenueagency/corporate/about-canada-revenue-agency-cra/access-information-privacy-canada-revenue-agency/info-source-appendix. The Privacy Act provides Canadian citizens and individuals present in Canada the right to seek access to their personal information that is held by the federal government. It also governs the collection, use, disclosure, retention and disposal of personal information. More information about requesting access to information can be found at canada.ca/atip.